Research On The Influencing Factors Of RMB Exchange Rate Under The Background Of Fed Rate Hike

After China announced the reform of the RMB exchange rate system on August 11,2015,the exchange rate of RMB has changed the trend of appreciation and moving toward a rapid devaluation channel.The average exchange rate of the US dollar against the RMB rose rapidly from 6.31 in August 2015 to 6.92 in December 2016.The RMB depreciated by more than 9.6%,and during the highest point in June 2014 to January 2017,China's foreign exchange reserves also decreased from approximately 3.99 trillion US dollars to about 3 trillion US dollars,shrinking by more than a quarter.The rapid devaluation of the RMB and the rapid decline in the size of China's foreign exchange reserves have brought adverse effects on the smooth operation of China's economy,which also caused widespread concern and research at home and abroad.However,there are still controversies regarding the reasons for the rapid devaluation of the RMB in this round and the future trend of the RMB exchange rate.At the same time,as the U.S.economy gradually improves,the Fed announced in December 2015 that it will increase the federal funds rate,signaling that the U.S.has officially entered a new round of interest rate hikes.As the world's largest economy,the change of US's monetary policy would have an impact on global liquidity,which will affect the capital flow and exchange rate of other countries.As the world's second largest economy,the exchange rate of RMB inevitably has been affected by U.S.monetary policy.With the gradual opening of China's capital projects,the influence of U.S.monetary policy to the exchange rate of RMB will grow bigger and bigger,influencing the Chinese economy through exchange rate channels.Therefore,it is of great significance to study the impact of the Fed's interest rate hike on the RMB exchange rate.In this context,this paper conducts specific research on the factors affecting the RMB exchange rate and the impact of U.S.monetary policy on the exchange rate of the RMB.This article first analyzes and summarizes the relevant research literature,then summarizes and analyzes the classical exchange rate decision theory.Based on this,this paper analyzes the main factors affecting the fluctuation of RMB exchange rate from both theoretical and empirical perspectives.Then,based on the theoretical analysis and empirical analysis,a VEC model of exchange rate and its influencing factors between China and the United States was constructed to conduct an empirical analysis.The empirical results show that there is a long-term equilibrium relationship between the RMB exchange rate and the interest rate level,income level,price level,and money supply between China and the United States,and the impact of income and money supply on the exchange rate is significant.The U.S.monetary policy will affect the RMB exchange rate through the supply channels of money,interest rates,and revenue channels.Our country can effectively cope with the fluctuation of the RMB exchange rate caused by U.S.monetary policy by ensuring stable growth of the domestic economy and controlling the domestic currency supply.